Gov. Wes Moore, Senate President Bill Ferguson (D-Baltimore City) and House Speaker Joseline Peña-Melnyk (D-Prince George's and Anne Arundel) issued a joint statement saying that patching deficits one year at a time "cannot continue."

"Today, we agreed to work together to develop a four-year plan that addresses the state's ongoing budget shortfalls and puts our finances on a more sustainable path," the three Democrats said. "A more predictable state budget will be a stronger foundation for diversifying our economy and supporting the most vulnerable in our communities."

The announcement comes as lawmakers prepare to return to Annapolis in January for a session dominated by fiscal pressure. The Department of Legislative Services in June projected a $2.6 billion structural gap for fiscal 2028, while the Department of Budget and Management has put the figure closer to $3 billion. The state's current $71 billion total budget includes just under $30 billion in general funds.

Much of the problem is homegrown. Lawmakers have long been warned that mandated spending grows by nearly 5% annually while projected revenues rise by only about 3.5%. A pandemic, a business climate many consider unfavorable and national economic pressures have compounded the mismatch.

The leaders also pointed to federal headwinds. "Trump administration cuts and economic uncertainty have added to the financial pressures facing Maryland," they said. "But we cannot wait for Washington to change course. We have a responsibility to address the challenges within our control."

External pressure is mounting as well. In May, S&P Global Ratings downgraded the outlook on the state's debt, citing "sizable and growing out-year budget gaps." The agency said it understood the state intends to establish a consensus budget framework ahead of the January 2027 introduction of the fiscal 2028 budget, calling structural adjustments that better align revenues with spending "critical" to maintaining the state's rating.

A major driver of the projected gaps is the Blueprint for Maryland's Future, the decade-long education reform plan. Fiscal 2028 is the first year in which Blueprint costs will exceed dedicated revenues, forcing the state to draw on the general fund. A first-in-the-nation digital advertising tax meant to help finance the Blueprint remains tied up in litigation.

Lawmakers may be asked to scale back the Blueprint or stretch its implementation over a longer period to absorb the costs.

Budget Secretary Yaakov "Jake" Weissmann acknowledged the urgency in September, saying "tough decisions" would be necessary and that "all options are on the table." Over the summer, state agencies were asked to submit budget requests with roughly 3% reductions, and two dozen Cabinet-level agencies were directed to prepare scenarios with 10% cuts — an amount roughly equal to the fiscal 2028 structural gap.

Weissmann has said the goal is to put the state budget on sound footing for the next two decades rather than fighting annual shortfalls.

One likely option is a combination of cuts and new revenue. The simplest lever — though politically unpopular — would be raising the state's sales tax, which has not increased since 2008, when it rose from 5% to 6%. A one-cent increase to 7% could generate an additional $1.2 billion annually. Expanding the sales tax to services, an idea considered in 2020 and 2024, is another possibility. Critics note that sales taxes are regressive, falling proportionally harder on lower-income families.

Over the past four years, Moore and his team have closed gaps through one-time fund shifts, tax changes and some cuts. The new four-year framework, the leaders said, will require "a careful review of state spending, a commitment to making government more efficient, and an honest assessment of which investments are delivering results and where changes are needed."

"There will be difficult decisions ahead," they said. "We know those decisions affect people's lives, and we are committed to making them together, being straightforward with Marylanders about the choices we face, and protecting the services and investments that matter most to our state's future."